Remember when the U.S. Environmental Protection Agency’s All Appropriate Inquiries rule was promulgated in 2005? For the first time since then, there will soon be a new revision to the ASTM E 1527 Standard and the time to begin preparing your staff and educating your clients is now. The E 1527-13 revision is the result of three years of discussion and debate among many dedicated stakeholders who spent countless hours at ASTM Phase I ESA Task Group meetings and on conference calls examining all parts of the standard and hammering out every word of the revision. The most significant revisions are in the areas of: REC definitions, agency file review, vapor migration/intrusion, user responsibilities and more. For this event, EDR Insight is fortunate to have the input of three professionals—an environmental professional, a commercial real estate lender and an attorney—who were active with the revision process and who each devoted significant time and expertise to shaping the new revisions. Join us for this important and timely event as the commercial lending and property risk management industry prepares to transition away from the -05 standard to E 1527-13. Target Audience: • Environmental due diligence professionals • Environmental risk managers at financial institutions Benefits to attendees: • Insights into specific areas of revision and a deeper understanding of what drove the changes • More clarity on REC-HREC-CREC definitions • More clarity on agency file review • An end user perspective from the lending sector • An attorney’s take on what the changes mean in the construct of CERCLA liability and commercial property transactions • Advice on how EPs and lenders should be preparing for E 1527-13 • Potential changes that end users may see in their Phase I ESA reports when E 1527-13 takes effect

1. Revisions to the ASTM E 1527 Standard:
Three Insider’s Perspective
Presented by:
• Paul Zovic, Senior Advisor, Endpoint Solutions Corp.
• Daria Milburn, Vice President, Manager REVAL/Environmental Risk, SunTrust Banks, Inc.
• Christopher P. McCormack, Attorney, Pullman & Comley LLC
© 2011 Environmental Data Resources, Inc.

2. EP’S PERSPECTIVE
Paul Zovic
Senior Advisor
Endpoint Solutions Corp
Milwaukee, WI
March 28, 2013

3. The Phase I Standard was updated to:
 Better reflect current paradigm
 Clarify terms
 Address need for more consistent deliverable
 Update the Legal Appendix
 Provide guidance on non-scope issues, especially
common BER issues

4.  Initiated in 2009
 Many meetings, many iterations
 Cross-section of market
◦ Users (banks, developers, property owners)
◦ Producers (consultants)
◦ Attorneys
◦ Regulators
◦ Others

5.  New definition for “release” and
“environment”, to align with CERCLA definitions
 New definition for migrate/migration, to
specifically include vapor migration
 Clarification that recommendations are not
required by the stadard

6.  File reviews

7.  File reviews
◦ If the property or any of the adjoining properties is
identified on one or more of the standard environmental
record sources, pertinent regulatory files and/or records
associated with the listing should be reviewed

8.  File reviews
◦ If the property or any of the adjoining properties is
identified on one or more of the standard environmental
record sources, pertinent regulatory files and/or records
associated with the listing should be reviewed
◦ As an alternative, the EP may review files/records from an
alternative source(s)

9.  File reviews
◦ If the property or any of the adjoining properties is
identified on one or more of the standard environmental
record sources, pertinent regulatory files and/or records
associated with the listing should be reviewed
◦ As an alternative, the EP may review files/records from an
alternative source(s)
◦ If, in the EP’s opinion, such a review is not warranted, the
EP must explain within the report the justification for not
conducting the regulatory file review

10.  Change to REC definition
◦ More aligned with AAI, but retaining some of the
additional guidance from prior E1527 versions

11.  Change to REC definition
◦ More aligned with AAI, but retaining some of the
additional guidance from prior E1527 versions
…the presence or likely presence of any hazardous substances or
petroleum products in, on, or at a property: (1) due to release to the
environment; (2) under conditions indicative to a release to the
environment; or (3) under conditions that pose a material threat of a
future release to the environment. De minimis conditions are not
recognized environmental conditions.

12.  Change to HREC definition

13.  Change to HREC definition
◦ Redefined to limit application of HREC to past releases
that have been addressed to residential/unrestricted
use (i.e. no AUL, no IC/EC)

14.  Addition of CREC definition
◦ Controlled REC to be used for risk-based
closures, where contaminants are allowed to remain
under certain conditions.
◦ Clarification that “de minimis condition” is not to be
used to describe CREC

15.  Clarification of REC, HREC, CREC
 File Reviews
◦ Management
◦ Justification
◦ Communication
 Educating staff and clients

16. Paul Zovic
Endpoint Solutions Corp
Milwaukee, WI
paul@endpointcorporation.com
414-858-2106

17. Daria K. Milburn
March 2013

18. Disclaimer
The views expressed in this presentation are based on
my observations and experiences in both banking and
consulting.
This represents my own very humble opinion, and
should not be interpreted to represent the view of
SunTrust or any other corporation.

19. It’s all about us.

20. What We Do
 Banks Manage Risk
 Areas of Focus
 Originating Transactions
 Foreclosures
 OREO Remedial Actions
 Facilities

21. Driving Forces
 Policies
 Product Expectations
 Risk Tolerance
Every bank is different.

22. Effect of ASTM Changes
 Greater Clarification
 More Information
Pushes towards a more complete report, but many banks
have their own scopes that use ASTM as a starting point
only.
The changes will not significantly affect what we do.

23. Remember……It’s all about us.

24. In the end….
 It all comes back to Risk Tolerance
 We define our own risks
 Label is irrelevant
 REC
 HREC
 CREC
 BER

25. Change is Good
Many thanks to the committee
and
Julie Kilgore.
Looking forward to 1527-21!
(ahhh the possibilities….)

26. ASTM E1527
2013 STANDARD
REVISIONS
Liability Perspectives:
CERCLA, All Appropriate
Inquiry and the Evolving
Phase I Assessment
Christopher P. McCormack
March 28, 2013

27. CERCLA Context: Defenses and
“All Appropriate Inquiries”
 CERCLA (Superfund) liability framework
– Strict – joint and several
– Based on “release”
– “Response costs” or injunction/consent order
 Defenses/LLPs: knowledge of and role in causing contamination
– Innocent landowner: “did not know, had no reason to know”
– Bona fide prospective purchaser: buys with knowledge, did not cause
– Contiguous property owner: did not know, did not cause

28. CERCLA Context: Defenses and
“All Appropriate Inquiries”
 “… made all appropriate inquiries into the previous ownership and
use of the facility in accordance with generally accepted good
commercial and customary standards and practices…”

29. CERCLA Context: Defenses and
“All Appropriate Inquiries”
 “All Appropriate Inquiries” - 2002 statutory criteria:
– Inquiry by environmental professional
– Interviews to gain information regarding potential for contamination
– Review historical information re property use since development
– Search recorded cleanup liens
– Review regulatory records re haz mat, haz waste, spills at/near facility
– Visual inspection
– Specialized knowledge of “defendant”
– Purchase price vs. value if uncontaminated
– Commonly known or reasonably ascertainable information
– Degree of obviousness of presence or likely presence of
contamination, ability to detect with appropriate investigation

30. CERCLA Context: Defenses and
“All Appropriate Inquiries”
 “All Appropriate Inquiries” - 2005 Developments
– Federal AAI Rule: 40 C.F.R. Part 312
 Performance standard (categories/areas of inquiry)
 Tracks statutory criteria
– ASTM E1527-05
 Procedure standard (like E1527-97: procedures inquiry must follow)
 Corresponds to and expands upon statutory criteria
 Endorsed as alternative to AAI: 40 C.F.R. § 312.11(a)

31. CERCLA Context: Defenses and
“Continuing Obligations”
 Post-Acquisition Actions to Maintain Defenses
– IPO:
 “reasonable steps” to stop/prevent release, prevent/limit exposure
 “due care” re hazardous substances in light of all facts and circumstances
– BFPP:
 Take “appropriate care” to stop/prevent release, prevent/limit exposure
 Cooperate with response actions
 Comply with use restrictions, institutional controls
– CPO:
 “reasonable steps” to stop/prevent release, prevent/limit exposure
 Cooperate with response actions
 Comply with use restrictions, institutional controls

32. 2013 E1527 Revisions: Changes that
Enhance Alignment with AAI
 User obligation to do (or contract for) search for Environmental
Liens, Activity and Use Limitations (E1527 Section 6.2)
– Express reference to 40 C.F.R. §§ 312.20, 312.25
– Complements EP search of institutional and engineered control
registries (E1527 Section 8.2)
 User inform EP if User believes price is below market due to
contamination (E1527 Section 6.5)
 User must gather information as needed to identify conditions
indicative of a release or threatened release (E1527 Section 6.6)
 User must consider degree of obviousness (E1527 Section 6.7)

33. 2013 E1527 Revisions:
“Professional Judgment”
 EP “shall, based on professional judgment, evaluate the relevant
lines of evidence obtained as a part of the Phase I ESA process to
identify recognized environmental conditions in connection with the
property” (Section 7.3.1)
 EP “shall exercise professional judgment and consider the
possible releases that might have occurred at a property in light of
the historical uses and, in concert with other relevant information
gathered as part of the Phase I process, use this information to
assist in identifying recognized environmental concerns” (Section
8.3.1)

34. 2013 E1527 Revisions: Changes to
Improve Classification of Conditions
 E1527-05:
– “de minimis”
– “historical recognized environmental condition”
– “recognized environmental condition”
– Classification problem scenario: “regulatory closure” with
contamination in place subject to …
 Institutional (land use) control
 Engineered control (cap)
 Self-executing legal status, informal “closure” (e.g. UST)

35. 2013 E1527 Revisions: Changes to
Enhance Classification of Conditions
 Solution: CREC

36. 2013 E1527 Revisions: Changes to
Enhance Classification of Conditions
 Revised HREC Definition:

37. 2013 E1527 Revisions: Changes to
Enhance Classification of Conditions
 REC definition: “de minimis” IS NOT a REC

38. Conclusions and Comments
 Incremental changes and improvements
 Improved alignment with statutory framework
 Clarity on REC/CREC/HREC/de minimis
 Some more AAI-like (performance based) concepts
 Using E1527 if ….
– CERCLA defenses/LLPs aren’t a priority
– You’re not seeking a brownfields grant

39. Contact Information
Christopher P. McCormack
Pullman & Comley, LLC
850 Main Street
Bridgeport, Connecticut 06601-7006
Tel: 203 330 2016
Fax:203 576 8888
Email: cmccormack@pullcom.com

40. BRIDGEPORT | HARTFORD | STAMFORD | WATERBURY | WHITE PLAINS
www.pullcom.com

41. Q&A
© 2011 Environmental Data Resources, Inc.